Impress your lender with sales key performance indicators

October 20, 2010

A good relationship with your lender is very important in order to get and maintain the funding levels you require. During my years as CFO and COO the lenders I dealt with always relied on historical financial data. Quarterly P&L, inventory listing, accounts receivable listing, etc. were submitted on specific intervals and once a year a face to face meeting to discuss how the business was doing and what the expectations for the next year were. Amongst other things we would talk about the budget for the next year but I always wondered how confident they felt about us achieving the sales targets in that budget.

How do organizations make sure they hit those budgeted revenue numbers? How confident are you (let alone your lender) that you will reach or exceed those sales targets? The less confident the lender is in your ability to perform to more risk you pose to him! Let’s take a look at the various stages in a typical marketing and sales process.

1. Marketing efforts need to demand for your products and services which will lead to an inflow of leads. These marketing efforts can be specific marketing campaigns, buying lists with companies that have specific attributes (SIC, revenue, location, etc.) or other marketing efforts but the sales team needs to have a steady inflow of leads in order to be able to achieve their sales targets.

2. The sales people will work a lead and in the end qualify the lead. Leads that look like they will be a good prospective opportunity are qualified and all others are deemed disqualified.

3. The sales people work the opportunity through the various phases of the sales process and will try to close the opportunity with a solid order. Not all opportunities will lead to an order and those opportunities are deemed lost. The opportunities that are successfully closed result in solid orders that will count towards achievement of the sales targets.

So what are the Key Performance indicators (KPIs) that would need to track and manage in order to make sure you have a steady stream of orders? The KPIs need to give you the required insight so you’re properly equipped to answer the following questions:

1. How many leads does marketing create per period (week/month/quarter)? The sales team needs a steady flow of leads in order to be able to keep their pipeline full

2. What is the quality of the leads per marketing activity or lead source? Your marketing team needs to know what activities or sources deliver the best leads for their investment. The qualify ration per lead source is important but more important is the value of the orders that resulted from the marketing activity and lead source. Knowing this will allow you to fine tune your marketing spend and drive the required number of quality leads for your sales team

3. What’s the total expected value of the opportunities in each phase of the sales pipeline? Are all the phases of the pipeline properly filled to ensure a steady flow of orders? As opportunities progress through the pipeline the likelihood that they will result in an order increases but along the process opportunities will fall off and will be considered lost opportunities. Tracking how many opportunities and the expected value of those opportunities that were lost is important and should be combined with the reason why they were lost and to what competitor. This information should also be tracked by week/month/quarter.

4. Closing the opportunity into a solid order is the goal of every sales person but do you know what percentage of opportunities each sales person closes? Knowing per sales person what percentage (number of opportunities as well as value) of opportunities will allow you to predict your future revenue streams and give you a good insight in the quality of the individuals in your sale team.

5. What sales people successfully close opportunities on their expected close date? Knowing which sales people close on the expected close date and which sales people are either too optimistic or too pessimistic with their expectations of close date. This information will allow you to better predict when opportunities will actually close once they get into the sales pipeline.

This list of KPIs might seem very complex but with the modern CRM systems that are available today it is relatively easy to track closed opportunities all the way back to the marketing effort that created the lead. Opportunity management does not need to be complex or labor intensive. Implement an appropriate sales process for your organization with a few pipeline phases and track the date that each opportunity changes from one phase to the next and relative to the expected close date will give you all the insight in the sales process you need. It will become easy to review the performance of your sales and marketing teams and this information will allow you to fine tune your marketing and sales efforts to drive the performance you are looking for.

Tracking and analyzing the KPIs described above will allow you to better predict and manage the future revenue streams of your organization and should increase the confidence you as well as your lender has in your ability of your organization to reach the sales goals you set out to achieve.



Topics: Sales, Technology, Blog Posts, Risk Management

Jos de Laat

DL Associates

Jos de Laat has throughout his career used the knowledge gained from his Master’s in Business Economics and his Master’s in Information Systems and Technology to help companies define and streamline business processes and automate them using state of the art technologies. With his extensive experience in finance, operations, sales, service and consulting he enjoys working with entrepreneurs and executive to focus on core business issues and in a collaborative approach design creative solutions that result in significant improvements in both top and bottom line. After many years in executive position in large, small and startup organizations Mr. de Laat has started his own consulting company, DL Associates. In this role he now provides business consultancy services with a focus on business process design and automation but when clients requests helps with other business related challenges like business planning, budgeting, system selection or interim management. In previous positions Mr. de Laat had the pleasure of working in over 40 different countries and as such he is also a great resource for organizations that are operating or want to operate outside of the US.
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